ITAT Kolkata Quashes Reassessment Against Rakhi Mondal, Rules Ad-Hoc Income Estimation Without Rejecting Books Is Invalid

February 17, 2026 : The Kolkata Bench of the Income Tax Appellate Tribunal has set aside reassessment proceedings initiated against Rakhi Mondal for the Assessment Year 2017–18, holding that the reopening was not in compliance with statutory requirements and that income cannot be estimated on an ad-hoc basis without rejecting the books of account.

The Bench, comprising Accountant Member Rajesh Kumar and Judicial Member Pradip Kumar Choubey, delivered the ruling on 17 February 2026 while allowing the assessee’s appeal in Rakhi Mondal v. Assessment Unit, Income Tax Department (NFAC).

The case arose after the assessee had not filed a return for AY 2017–18. Subsequently, the Assessing Officer issued a notice under Section 148 on 21 March 2024, following an order under Section 148A(d). In response, the assessee filed a return declaring an income of ₹2,00,130. However, during reassessment, the Assessing Officer treated ₹1.86 crore as unexplained money under Section 69A, citing failure to explain bank credit entries.

The Commissioner (Appeals) upheld the assessment, prompting the assessee to approach the Tribunal.

On examining the validity of reopening, the Tribunal noted that the reassessment had been initiated beyond three years from the end of the relevant assessment year. In such cases, Section 149(1)(b) mandates that the Assessing Officer must possess material indicating that income exceeding ₹50 lakh has escaped assessment in the form of assets, expenditure, or entries in books of account.

The Tribunal found that the reopening was based merely on information that the assessee had undertaken financial transactions of approximately ₹1.85 crore and was classified as a “high-risk non-filer.” It held that these grounds did not satisfy the statutory threshold. The Bench observed that the mandatory conditions under Section 149(1)(b) were not fulfilled and consequently quashed the reassessment proceedings.

On merits, the Tribunal examined the nature of the assessee’s business, which involved purchasing and selling agricultural produce such as paddy and grains in a rural area where cash transactions are common. It noted that even the Commissioner (Appeals) had accepted the genuineness of the business and had not disputed the activities.

Despite this, the appellate authority had estimated income by applying a 15% profit rate on the turnover of ₹1.98 crore, arriving at an income of ₹29.76 lakh.

The Tribunal held that such estimation was legally unsustainable. It emphasized that no ad-hoc estimation of income can be made unless the books of account are first rejected under Section 145(3). Relying on the Supreme Court’s ruling in PCIT v. RG Builder Engineer Ltd., the Bench reiterated that estimation without rejecting books lacks legal basis.

Accordingly, the Tribunal set aside the addition based on estimated profits and allowed the appeal in full.

Case Title: Rakhi Mondal v. Assessment Unit, Income Tax Department (NFAC)
Case Number: ITA No. 2151/Kol/2025